The Power Of Customer Calls: Maryland Supreme Court Upholds Public Service Commission’s Interpretation Of The Maryland Telephone Solicitations Act – Advertising, Marketing & Branding

Last month, the Supreme Court of Maryland delivered a pivotal ruling defining the scope of the
Maryland Telephone Solicitations Act (MTSA), holding that the act
extended to inbound calls initiated by consumers who engaged with
merchant advertisements. The Maryland Supreme Court also confirmed
that the Maryland Public Service Commission can
enforce the MTSA against covered entities.

The case, In the Matter of Smart Energy Holdings, LLC D/B/A
SmartEnergy, originated in response to customer complaints to
the Public Service Commission’s Consumer Affairs Division (CAD)
alleging that their bills were excessive and that they were unable
to cancel their service with SmartEnergy, a provider of 100% green
energy. After proceedings before an administrative law judge, the
Public Service Commission held:

• SmartEnergy’s postcards had misled consumers into believing
  that SmartEnergy was affiliated with their current energy
  company




• Neither the postcards nor the customer service representative
  scripts adequately disclosed the terms of the discounts being
  promised




• SmartEnergy had engaged in deceptive conduct when consumers
  attempted to cancel their services

The Public Service Commission concluded that the record
warranted the cancellation of all SmartEnergy customer enrollments
in Maryland that occurred over the phone, the return of all such
customers to utility standard offer service, and the issuance of
refunds to affected customers for the difference between
SmartEnergy’s rate and the customers’ utilities’
standard offer service.

Before the Maryland Supreme Court, SmartEnergy argued:

• The Public Service Commission lacked authority to apply the
  MTSA




• SmartEnergy properly relied on advice from the CAD that the
  MTSA did not apply to inbound calls




• The Public Service Commission’s findings were not supported
  by substantial evidence because it improperly extrapolated from 34
  consumer complaints

The Maryland Supreme Court rejected all three arguments. First,
it found that the plain language of the Public Utilities Article
permits the Public Service Commission to investigate and impose
remedies for violation of Maryland’s consumer protection laws.
Next, the opinion affirmed the Public Service Commission’s
conclusion that the MTSA applies to inbound calls when the calls
are placed in response to marketing materials that do not contain
statutorily required disclosures. These include:

• The name, address, and telephone number of the merchant




• A description of the goods or services being sold




• Any limitations or restrictions that apply to the offer

Additionally, the opinion concluded that SmartEnergy’s
reliance on communications from CAD was misplaced, emphasizing that
administrative officers like CAD lack the authority to change laws
or grant exemptions. The Maryland Supreme Court further explained
that the CAD letters were generic, not the result of a formal
rule-making process, and that SmartEnergy’s focus on a few CAD
letters ignored other letters supporting the Public Service
Commission’s stance on applying the MTSA to inbound calls.

Finally, although SmartEnergy argued that the Public Service
Commission’s findings were not supported by substantial
evidence because they were based on extrapolations from only 34
complaints out of the 104,000 prospective customer calls it
received, the opinion explained that the following constituted
substantial evidence:

• The postcard’s omission of license numbers and deceptive
  language implying an affiliation with utility companies




• Audio recordings of the sales script demonstrating deceptive
  practices and failure to disclose important terms and
  restrictions




• Testimony and recordings revealing recurring instances where
  agents failed to follow the cancellation protocol training they had
  received or failed to provide accurate information and answer
  questions when customers called

The Maryland Supreme Court also rejected SmartEnergy’s
extrapolation argument, contending that all of the calls were based
on the same script, so the 34 calls were representative, and that
SmartEnergy possessed all of the call recordings and could have
presented opposing samples. Although focused on energy suppliers,
the ruling is instructive for all businesses engaging in
telemarketing in Maryland, and for any business that relies on
agency interpretation of appropriate conduct. Including proper
disclosures in marketing materials and adequately training and
monitoring employees should be part of every telemarketer’s
best practices. We will be monitoring how the opinion impacts
regulatory investigations and litigations.

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